BUYING INTO CAPITALISM June 19, 1997 TRANSCRIPT

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This year Russia will join the leaders of the G-7 nations for 3 days of economic discussion in Denver. Paul Solman leads two european businessmen in a debate over whether America's economy is the role-model it wants to be.

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A RealAudio version of this NewsHour segment is available. NewsHour Links: June 28, 1996 A report on last year's G7 Summit in France. June 28, 1996 Background on the economic problems faced by last year's summit. February 21, 1996 Paul Solman looks at world trade agreements and their impact. Browse coverage of economic issues.

PAUL SOLMAN: In Denver, Colorado, they've been preparing for an annual economic dance, the meeting of the so-called G or group, of 7, where the world's major economies will again be cutting the rug. This year, the U.S., Canada, Japan, and the major European powers are joined by Russia, making it a summit of 8. Over the years, the aim of these summits has been to air out and smooth over national differences, to help lubricate world trade here over pre-summit cocktails. But during the dozen years I've reported on them the get-togethers have often been an occasion to bash the U.S. economy for its deficits, its downsizing, its loss of leadership to Japan.

SPOKESMAN: How many days do you stay in Japan?

PAUL SOLMAN: This year, however, the U.S. free market model seems the one to emulate. And that's something of a surprise--even to the Treasury Department's Lawrence Summers.

LAWRENCE SUMMERS, Deputy Treasury Secretary: If some academic economists like me had predicted four and a half years ago that the United States would have 4.8 percent unemployment, 2.5 percent inflation, real wages rising, inequality coming down, and the Dow at 7500, the assumption would have been that you were smoking something. And yet, that is exactly--

PAUL SOLMAN: To many observers, the U.S. economy is again number one. Take Germany. An economic powerhouse for years, it was a model of the welfare state. But now with unemployment near 13 percent, its government, like so many, is talking about more flexible U.S. type markets. The only major outlier, in fact, seems to be France. Though unemployment there is also around 13 percent, France has spurned the U.S. model and recently voted the socialists back into power with their plan for job creation via the public sector.

So who's right? We decided to stage a debate with two non-experts who happen to both know Denver and the issues. Karl Schmidt is a German who makes recycling machinery here, exporting 30 percent of it. He came to this country with one suitcase back in 1968, age 23. He's added an asset or two in the years since. France's Christian Roche, by contrast, teaches French at the University of Colorado, plays classical guitar, lives simply, and deplores the U.S. economic model. We asked the Frenchman to take on the German in and around the summit's host city--starting at Schmidt's North Denver factory.

PAUL SOLMAN: Mr. Schmidt, what's better about being a businessman in the United States than in your native Germany?

KARL SCHMIDT, German Businessman: It's basically the flexibility you have and the competitive edge you have. Like in Germany, for instance, they get an average of 25 days' paid vacation.

PAUL SOLMAN: A year.

KARL SCHMIDT: A year. They get 17 paid holidays a year. We get about two weeks' vacation, two and a half weeks' vacation. We are much more competitive in this country, and that makes it easier on the flexibility also.

PAUL SOLMAN: By flexibility what do you mean?

KARL SCHMIDT: Flexibility is--what I mean by flexibility is really the--you can have a union, or you do not have to have a union.

PAUL SOLMAN: And you don't have one?

KARL SCHMIDT: I do not have a union.

PAUL SOLMAN: So you can fire people at will?

KARL SCHMIDT: Yes, correct.

PAUL SOLMAN: Flexibility. To Schmidt, it also means less government red tape in starting up a business like his, for instance. And it means fewer benefits. Schmidt says they cost an extra 35 to 50 percent of wages in the U.S. versus an extra 150 percent in Germany. So more flexible means cheaper. We asked Mr. Roche for his reaction.

CHRISTIAN ROCHE, French Professor: Well, I understand that all the advantages are on the side of Mr. Schmidt because from the point of view of the worker if I am in Europe I have more paid vacations, I have not--I'm not under your power like I am here. Here you can fire me. If I am there, I can negotiate with you.

PAUL SOLMAN: So you have no sympathy for his workers' position?

KARL SCHMIDT: We treat our workers better in the long run because we personally in our company, we have a profit sharing plan; we have a pension plan. We pay the family health insurance. We pay the family dental insurance. So we really do more for our workers than they do over there.

PAUL SOLMAN: So, Mr. Roche, he's saying, obviously, that in the long run it's better for the workers, I guess, being there's very high unemployment in Europe, for example, and very low unemployment here, so that your workers, getting this great deal, don't have very many jobs.

CHRISTIAN ROCHE: Yes, but you don't give up values that are part of your history and that are considered like civilization. Like what you are telling me, dental plans, health insurance, you are very proud, and I congratulate you that you give that to all your workers, except that if they are fired, they can go somewhere else where there is no Mr. Schmidt to protect them, and that's where in a political point of view I don't see exactly how it's better here.

KARL SCHMIDT: However, when it comes to that kind of situation it's relatively simple. You hold onto the best employees you've got.

PAUL SOLMAN: And what happens to the ones who are not so good?

KARL SCHMIDT: You lay ‘em off.

PAUL SOLMAN: Schmidt says he's had to resort to layoffs twice over his 19 years as a boss; that he's fired only six to eight employees of the hundred or so he's hired over the years. Karl Schmidt's firm is making it in Colorado. And it's not alone. Denver's new airport is packing them in. Coor's Beer, once a cult brew, now exports to 35 countries. In fact, Colorado's very much part of the global economy, with state exports up more than 75 percent since the early 90's. So, high-tech firms are thriving here; construction is booming; and if you want to shop, try the new Park Meadows Mall.

PAUL SOLMAN: Mr. Schmidt, people also point to the U.S. economy as a model for the world in terms of what it provides to the consumer. Do you agree with that?

KARL SCHMIDT: I totally agree with you because you're limited in Germany to hours you can go shopping, and you're limited to all the choices you have. And there's much more that's open in this country, and, therefore, it's much easier on the consumer, therefore, you've got better consumers.

PAUL SOLMAN: Well, Mr. Roche, you've been a consumer in France for many years. How do you respond?

CHRISTIAN ROCHE: When I was in France, I didn't see myself as a consumer. When I'm here, I want to get out as fast as I can because it's like I am obliged to be a consumer. And the choice I have, I disagree, because here I only find the same things that have been successful because it's always the same thing every place.

PAUL SOLMAN: Every mall you mean.

CHRISTIAN ROCHE: Every mall is the same thing. I want to buy a book. It would be the best seller. And if they close the stores in Europe because they think there is something else in life other than consuming and selling. There is a family life and other values.

PAUL SOLMAN: But, Mr. Roche, in your country, 12.8 percent unemployment in France and in his country origin the same, Germany. Here in Denver, jobs go begging because there aren't enough workers for them. I mean, what are you going to do in France?

CHRISTIAN ROCHE: Either the French will become addicted consumers like here, and be happy to work around in this kind of very sterile environment, or they will find another way of expressing themself as total human beings sharing work, for example, if there is not work for everybody.

PAUL SOLMAN: Shorter work weeks.

CHRISTIAN ROCHE: Shorter work week.

PAUL SOLMAN: What about that, Mr. Schmidt, why not shorten the work week, have people share the work, so that you have more jobs?

KARL SCHMIDT: Let's see. You would have to pay for 40 hours, and you only would get 32 hours' worth of work out of that employee, therefore, you're competitiveness would not be there. Why do you think that Mercedes Benz and BMW have built a factory over here?

PAUL SOLMAN: Because it's cheaper.

KARL SCHMIDT: Yes. It's more competitive.

PAUL SOLMAN: You get more out of the people, given the amount you pay?

KARL SCHMIDT: Correct.

PAUL SOLMAN: France's Mr. Roche had another critique of the mall; that its jobs were typical of the kind the U.S. creates.

CHRISTIAN ROCHE: These people are working very low wages. They cannot even afford all these things. You are selling a dream, the dream that you are working, you can buy everything. Mr. Schmidt can. I cannot, and the workers that are there cannot either.

PAUL SOLMAN: Indeed, even this upscale mall features low-wage jobs in abundance, and many of the products its sells, critics charge, are made by exploited foreign labor in places like China and Latin America. But while we were shooting in the mall, to illustrate Mr. Roche's point, Mr. Schmidt was waxing philosophical.

KARL SCHMIDT: But see the difference really is that the French work to live, so they only work enough to live.

CHRISTIAN ROCHE: Right.

KARL SCHMIDT: But the Germans and the Americans really live to work. We're here to get up, go higher, make more money. That's basically the whole thing in a nutshell; that the French enjoy life more. That's why they have four hours' worth of--four hours' of lunches.

PAUL SOLMAN: But ultimately, that means they're going to be poorer, is that what you're saying?

KARL SCHMIDT: Yes.

PAUL SOLMAN: Okay. Last stop. The Good Samaritan Homeless Shelter, which Mr. Roche felt spoke more eloquently than he could about the down side of the American economic model. Father Ed Judy ministers to the homeless here and supports Mr. Roche, saying that low income jobs just don't pay the rent.

FATHER ED JUDY, Samaritan House: People have to work two jobs, or if they're married, both couples have to work and then they have problems of day care, and especially the ones that are on the bottom of the economic level.

PAUL SOLMAN: Music to your ears, Mr. Roche?

CHRISTIAN ROCHE: Exactly, because part of you is opening the description toward values that are beyond and transcending the consumer, I think, and when I think about the Park Meadow malls where we were. There were not as many lively conversations as in this place. This place people have real needs they are struggling with. In the Park Meadow they are more like ghosts, consuming without knowing why.

PAUL SOLMAN: Last word to you, Mr. Schmidt. Both of these guys are saying that capitalism in its American incarnation has devalued life, made it into pure consumerism and pure competition. No? Yes?

KARL SCHMIDT: I tell you what it is. It's up to the individual. I can go into the opera. I can have a family. It's really in America you can do what you feel inside is correct.

PAUL SOLMAN: America, land of the individual. It may not work for everyone, but at this year's economic summit the American model--freer markets, weaker unions, less of a safety net--is the one they're all talking about because none of the seven other countries meeting in Denver is growing as fast, as stabily as the U.S.A.

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